Higher tax on wine urged

Too much of a good thing? ... Higher taxes on cheap wine could lead to savings including reduced incidence of motor accidents, less alcohol-related violence, burglaries and use of the criminal and justice and child-protection systems.
Photo: Jessica Shapiro

by
Gemma Daley

Higher taxes on cheap wine along the lines recommended by the Henry review would save Australia $230 million a year, the first rigorous cost-benefit study of the issue has found.

Economic consultant
John Marsden
’s analysis will be the basis of calls on Tuesday for alcohol tax reform to reduce the social cost of drinking, which is about $15 billion a year. Productivity Commission deputy chairman
Mike Woods
will attend a seminar in Canberra on alcohol taxes, where the analysis by the Foundation for Alcohol Research and Education will be released.

“Australians already pay a heavy price as a result of alcohol consumption and that financial burden extends far and above what we pay at our local bottle shop," FARE chief executive Michael Thorn said. “Even when we look at half the ­picture and take a conservative approach which looks solely at the harm to others, this analysis demonstrates unequivocally that alcohol tax reform would reduce that price."

The report tries to quantify the benefits and costs of adopting former Treasury secretary
Ken Henry
’s 2010 recommendation to tax all alcohol at the rate applying to draft beer. The replacement of the wine equalisation tax with a volumetric excise of $29.05 per litre of pure alcohol would result in at least $230 million of benefits to the community, the analysis says.

The Henry review said that though beer was taxed on the basis of alcohol content, wine was either not subject to alcohol tax (if it was produced in small wineries) or taxed on the basis of price, meaning the tax on a bottle of Penfolds Grange was about $100 while a $10.99 two-litre cask of wine was taxed at just $1.59.

Treasurer
Wayne Swan
has refused to look at the change, saying Australia is experiencing a wine glut.

The analysis does not count a reduction in the cost of harm to drinkers and a decline in the costs of alcohol-related absenteeism as benefits. Among the benefits it does include are reduced incidence of motor accidents, less alcohol-related violence, burglaries and use of the criminal and justice and child-protection systems. It values carers’ time at 10 per cent of average weekly earnings rather than at market rates.